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The Business Behind Nonprofits

Photo from PM Americano. 

The Business Behind Nonprofits

The face of nonprofit organizations is changing at a rapid pace. Businesses that once fell under the single title of nonprofit now have the chance to venture into the for profit sector of the business world while still upholding its original mission. Along with these changes comes about the hybrid of for profit and nonprofit organizations, sending out a new wave of popularity throughout the business world.

ASU alumnus Jeff Malkoon, is one of the many people discovering the opportunities that lay within the changes of nonprofits. Malkoon was unsure of what to expect when he first headed down to Uruguay to work with A Roof for my Country, also called TECHO, a nonprofit organization that mobilizes youth volunteers to improve economic development in 19 countries. Malkoon worked with youth volunteers on various builds that would provide people with new homes. Participants of TECHO later go on to go through job training and language training to better improve their everyday lives.

“I was inspired by the work they were doing and I thought ‘when I get back to the United States what can I do to keep working with this nonprofit organization?’” Malkoon says. “I thought ‘I’ll start a company.’”

During his time in South America, Malkoon noticed many locals were smearing dolce de leche, otherwise known as caramel, on to their sandwiches instead of the peanut butter like he was used to seeing in the United States. Malkoon was startled by this given that peanuts were grown right in Uruguay’s backyard. Dolce de leche may be delicious, but it holds no nutritional value.

“I thought if I could create kind of a creamier line of nut butter beyond traditional North American nut butter maybe people would try it outside of the United States, and maybe they would use the nuts that they’re growing to enhance the nutritional value of people’s diets,” Malkoon says.

As soon as Malkoon set foot back in the United States he went straight to his mother’s kitchen to perfect his line of six, nutritional peanut butter flavors. Once his product was completed Malkoon sat down to work out the business model that he felt would best achieve his goal. Although he is a graduate with a master’s degree in nonprofit management Malkoon found himself in the midst of the for-profit world.

“This is a for-profit company with a social mission,” Malkoon says.

PB Americano, Malkoon’s company, is a brand of companies that is a hybrid for profit and nonprofit businesses. At the beginning of his career PB Americano was donating 100% of the proceeds from the sales of its dark chocolate peanut butter to TECHO. However, as time went on Malkoon realized doing so might mean the downfall of his original mission.

“We’re kind of moving away from doing 100%, which is more idealistic than it is realistic,” Malkoon says. “We’re doing a restructure of that.”

Still aiming to help TECHO and other local Phoenix nonprofit organizations Malkoon decided to create his own nonprofit organization, The Funds for the Americas. A portion of the proceeds from the sales of PB Americano now goes into The Funds for the Americas, which is then distributed to various nonprofit organizations. PB Americano’s close work with nonprofit organizations has motivated the company to apply for b-corporation status.

“It’s kind of a government distinction where companies can apply for b-crop status and you kind of get a stamp of approval that you care about social issues and you care about the environment maybe more than the average business and you prove that in a number of ways,” Malkoon says.

Although the nonprofit sector is Malkoon’s expertise he quickly realized how much of an impact for-profit organizations can also have.

“Without a revenue generating business we can’t really help anyone and that’s something we’ve learned,” Malkoon says. “You want to just help nonprofits but you have to have a sustainable business model to help nonprofits in a sustainable way.”

Various other organizations have taken notice of the advantage to hybrid organizations and honed in on the specific skill set required to run such a business. 

Arizona Microcredit Initiative (AMI), a registered 501(c)3 and student-run nonprofit allows students to gain real world experience by working with clients who want to create a  startup business. ASU economics and journalism senior Liz Nichols has found experience in the nonprofit sector while working at AMI.

As the Director of Operations, Nichols works closely with the recruitment section of the organization, but receives plenty of exposure to the company’s main initiative, to empower passionate individuals to start their own business.

“Our main focus is underserved entrepreneurs,” Nichols says. “Since we are a registered nonprofit it’s unique that we do have the ability to provide micro loans for business development. Any interest that we collect, which is substantially below industry rates is solely to keep our organization stable so we can continue to work with more clients in the future.”

As a student-run organization AMI originally received funding through the Edson Student Entrepreneurship Initiative at ASU. The original three founders had presented their plan of AMI for the grant and ended up winning. They later brought on a second wave of staffers to continue with the organization’s main mission and to further shape it.

The organization currently gains a majority of its funds through various grants. Although AMI is completely student-run and volunteer based, the organization functions just as any other business would.

“We are running a business essentially,” Nichols says. “We have real life clients, we have real money, and we work with real life situations that are just completely different from what you would do within the university.”

Working with AMI has not only exposed Nichols to various business skill sets, but has also taught her the power of nonprofit organizations and the impact they can have on the community if run correctly.

“I initially joined because I was really looking for something that I could devote my time to in a meaningful way,” says Nichols. “It’s just a really cool way to use the skills and concepts that you learn in the classroom and actually work with someone one-on-one who hasn’t had that opportunity to have that education and watch them grow their business because of what you’ve been able to help them with.”

A similar organization, SEED spot is also a registered 501(c)3 nonprofit organization which aims to provide future businesses with the resources they may need to be successful. The company receives about 60% of its funds from donors and also charges program fees ranging from $500 to $3,500.

ASU alumna and SEED Spot CEO, Courtney Klein identifies closely with Malkoon and Nichols’s desire to help others and actively uses her knowledge of the business world to pursue her main goals. With a masters degree in nonprofit and leadership management Klein knew exactly what for profit and nonprofit companies needed to utilize in order to be successful.

“For both for profits and nonprofits that we work with it’s really about the impact you want to make and how a business model shapes around that,” says Klein. “You can come up with a brilliant business model, but if your customers or clients aren’t willing to pay for it you’re toast.”

SEED Spot works closely with businesses on perfecting their business model and connecting upcoming businesses with resources around the valley that they may not be aware of. Specifically with nonprofit organization the company emphasizes the importance of sticking with a single mission.

“There are a lot of nonprofits that start out with one intention and kind of have mission drift and follow donor dollars,” says Klein.

By working closely with both for profit and nonprofit businesses Klein has seen the business world shift and bend to the demands of the people. She highlights the importance of the b-corp status as a stepping-stone for what is to come.

“I think we’re starting to see more and more hybrid models for for profit companies that are solving problems that historically nonprofits solve,” says Klein. “I think what that means for the nonprofit sector is that they’ll become a lot more business savvy and have a sustaining revenue model attached to the concept to make sure they can compete.”

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